OptionsHouse

Options Trading News

May 21, 2013  Tue 2:14 AM CT

HCA: SEE CHART GET CHAIN FIND STRATEGIES
HCA has been consolidating after a big move, and one investor wants time for it to rally again.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 September 41 calls for $1.56 and the sale of a matching number of September 35 puts for $1.33. A related trade occurred at the same time in the June 40.50 calls, which were sold for $0.42, and the June 33.50 puts bought for $0.19. There was no cost aside from commissions.

Volume was below open interest in June but not September, which suggests that an existing position was closed and rolled forward in time. The strategy is bullish, with a strong correlation to the hospital company's stock.

Owning calls locks in the price where shares can be purchased, while selling puts creates an obligation to buy if they drop. Combining the two lets the investor fund a long bet by writing insurance on the stock. The strategy stands to generate significant leverage if the trader is right about the direction. (See our Education section)

HCA fell 2.28 percent to $38.20 yesterday. It's up more than 50 percent in the last year but has been stalling on either side of $40 since early April.

Yesterday's bullish trade pushed total option volume to 9 times greater than average in the session, according to the Heat Seeker.
Share this article with your friends


Related Stories

HCA

Downside position is extended in HCA

August 23, 2016

The acute-care hospital operator reported bearish quarterly results on July 28 and is down 8 percent in the last month.

OptionsHouse

Premium Services

Education & Strategy

Dissecting a big institutional trade

This week's column will study a recent call ratio spread. We're not recommending using this strategy because it has potentially huge risk. But we can learn from this different use of options by a large institutional investor.

View more education articles »